Tax season is here, or at least the documents have begun showing up in our mailboxes and inboxes. I know we have a small paper pile building on our desk (and quite a ways to go in order to round up all of the documents needed to file our tax return). While the majority of Americans take great pains to ensure that they are paying their taxes in full, there’s a small percentage of the population that does not feel a duty to do so.

Partly fueled by the recession and huge government debt, the IRS has hired lots of new employees and made it a priority to catch tax cheaters. In 2009, 100 new employees were hired in order to get a new “high wealth unit” within the IRS up and running (this unit focuses on viewing wealthy individuals’ holistic portfolios–trusts, real estate investments, privately held companies and other business entities—to find taxes that have not been paid).

Reward money for snitching on tax evaders has been increased, and countries notorious for letting Americans open up tax-evading accounts such as Switzerland, Liechtenstein and Luxembourg are cooperating more with the United States to the effect of handing over lists of tax evaders. Suffice it to say, the government is attempting to find more money by closing up some leaks. So what kind of leaks have they closed up over the last several years?

Ring of Attorneys, Accountants and Bankers’ Multi-Billion Dollar Tax Scheme: Over a ten year period, Paul M. Daugerdas, Donna M. Guerin, Denis M. Field and David Parse racked up $7 billion in tax losses through a tax shelter scheme in which they designed, marketed and implemented fraudulent tax shelters used by wealthy individuals to avoid paying taxes. Not only did they help their clients get a smaller tax bill, but these guys made $130 million in profits. Prosecution and sentencing took place in 2011.

Wife of US Representative Aids in Falsifying $7 million Tax Return: US Representative John F. Tierney’s wife was convicted this year on four counts of aiding and abetting the filing of false tax returns for her brother. Her brother, a federal fugitive indicted on illegal gambling charges (running an illegal gambling business in the United States from the Caribbean island of Antigua), failed to declare $7 million in gambling profits. Patrice Tierney aided by characterizing the $7 million as commissions and not profits to his tax preparer (she managed her brother’s finances and kept detailed records of everything). On January 13, 2011 she was sentenced to 30 days in jail followed by five months of probation.

Tax Filer Using Tax Returns Unbeknownst to Clients: Can you imagine go to a tax preparer, going through the process with them to fill out your tax return form, and then that tax preparer adding a Schedule C for a pretend business under your name onto your tax return form? A woman tax preparer did this, and stole over $130,000 between 2004 and 2007. Shannon Elaine Ford was sentenced in 2011 to serve 21 months in prison, three years of supervised release, and to pay $20,665 in restitutions.

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Tax cheaters actually help keep taxes down for honest people. How can this be? If the tax cheaters were paying their fair share, wouldn’t the government need to collect less money from honest people? Strangely, no!

As taxes go up, the incentive to cheat does too. When you have enough people cheating, it helps put a ceiling on how much taxes can increase. When the IRS steps up enforcement and makes it harder to get away with cheating, it also allows Fahd government to raise taxes on everybody else.

We’ve got it just as bad in the UK. We’ve got these little territories that look after their tax and local affairs as well as a great place to smuggle your money in… in return the English tax payers has to foot the bill for defence and foreign policy…. as if the Isle of Man needs a defence policy!!!

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